Long-Term Care Insurance

We may require, in our later years, some assistance in our daily living. According to statistical data, one out of two Canadians are likely to need long-term care after they reach the age of 75. A forward thinking approach is necessary as lifespans increase and as population ages. Let us try to acquaint you to the basics of long-term care policies and the key vocabulary associated with them.

Definition – Long-term care insurance pays the insured a weekly tax-free benefit in the event that they require assistance with two out of the six activities of daily living; namely bathing, eating, dressing, toileting, maintaining continence, and mobility (the specific activities depend on individual policies). It can minimize the depletion of one’s savings, or prevent your family from incurring unexpected debt due to medical and medical-related expenses associated with the change in lifestyle.

The basic need for long-term care – According to Health Canada’s research, the elderly constitute the fastest growing segment of Canada’s population. One out of every seven Canadians is a senior. With the shrinking tax base resulting from a retiring workforce and the increasing medical costs associated with an ageing population, there’s a certain need to gather additional finances to cover these expenses. In reality, long-term care coverage protects the assets and health of two generations—the active income earners (who would need to find extra financial and emotional resources to care for their retired relatives) and senior citizens, who are dependent on their savings.

Temporary long-term care versus ongoing long-term care – It is important to note the differences between these two types of care to understand your coverage. Temporary care occurs for weeks or months, and is generally used to describe rehabilitation periods after a hospital stay, recovering from surgery, an illness, injury or terminal medical condition. Ongoing long-term care requires assistance for a chronic medical condition or chronic severe pain, permanent disability or dementia.

Formal versus informal care – Formal care are volunteers or paid caregivers who are registered with an official organization. These include for-profit or non-profit nursing homes. Informal care is the term used for caregivers who provide unpaid care out of love, respect or friendship to the beneficiary.

Skilled care versus custodial care – Another difference which is important to note. Skilled care refers to services which can be provided only by licensed medical personnel. Custodial care refers to those services and supplies which can be given by any individual without specific credentials, provided that thorough documentation and a treatment plan is approved by medical supervisors. Some long-term policies only cover skilled care.

Setting – Long-term care can be provided at home, in the home of a family member or friend of the recipient, adult day services location, in an assisted living facility or board-and-care home, hospice facilities or nursing home. This is an important point—many policies have limitations and pay benefits only when facility care assistance is required; they do not cover home care.

Elimination periods – Another important aspect of long-term care policies is the amount of time which must pass before receiving a weekly benefit. The benefit period determines how long the coverage will be paid to the policyholder.

Premiums – Premiums are determined by three factors—the elimination period, benefit period and the amount of daily benefits. Pay extra attention to premium caps, as most long-term care policies in Canada offer guaranteed premiums for only the first five years after the policy takes effect.

Riders – Long-term care plans have several riders which are worth looking into. The most important ones are the “cost of living adjustment” and “return the premium” riders. The former allows the benefit to be raised according to inflation, whereas the return of premium benefit returns the paid premiums to your beneficiary in the event you pass away.